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CIRCULAR

Amending and supplementing a number of points in the Ministry of Finance’s Circular no. 27/2007/TT-BTC of April 3, 2007, Guiding the management and payment of investment capital and non-business capital of investment nature belonging to the state budget capital source

Pursuant to State Budget Law No. 01/2002/QH11 of December 16, 2002;

Pursuant to the November 26, 2003 Construction Law and the Government's Decree No. 16/2005/ND-CP of February 7, 2005, on the management of investment projects on the construction of works, and Decree No. 112/2006/ND-CP of September 29, 2006, amending and supplementing a number of articles of Decree No. 16/2005/ND-CP of February 7, 2005;

Pursuant to the Government's Decree No. 52/1999/ND-CP of July 8, 1999, promulgating the Regulation on construction and investment management, Decree No. 12/2000/ND-CP of May 5, 2000, and Decree No. 07/2003/ND-CP of January 30, 2003, amending and supplementing a number of articles of the Regulation on construction and investment management, promulgated together with the Government's Decree No. 52/1999/ND-CP of July 8, 1999;

Pursuant to the Government's Decree No. 71/2005/ND-CP of June 6, 2005, on the management of investment in the construction of peculiar works;

Pursuant to the Government's Decree No. 99/2007/ND-CP of June 13, 2007, on management of expenditures for investment in construction of works;

The Finance Ministry amends and supplements a number of points in the Ministry of Finance's Circular No. 27/2007/TT-BTC of April 3, 2007, guiding the management and payment of investment capital and non-business capital of investment nature belonging to the state budget capital source, as follows:

1. Clause I, Section A, Part II, is amended as follows:

"1. For planning projects: They have planning outlines or tasks, which have been duly approved.

2. For investment preparation projects: They are in line with duly approved branch or territorial development plannings.

3. For investment execution projects: They have investment decisions which are issued prior to October 31 of the year preceding the plan year.

4. The duration for allocation of capital for execution of group-B projects must not exceed four years, or two years for group-C projects."

2. Point 5, Clause II, Section A, Part II, is amended as follows:

"5. Verification of allocation of investment capital:

5.1. For projects managed by ministries:

The Ministry of Finance shall verify investment capital allocation plans, give its opinions on projects with uncompleted investment procedures and failing to satisfy the conditions for capital allocation, and concurrently notify these opinions to the State Treasury. Ministries shall reallocate capital according to current regulations, and submit reallocation plans to the Ministry of Finance and the State Treasury for allocation and payment. Ministries' plans on investment capital allocation and reallocation in strict compliance with regulations serve as a basis for capital allocation and payment.

5.2. For projects managed by provinces or districts:

Based on investment capital plans decided by People's Committees, provincial-level Finance Services or district-level Finance and Planning Sections shall examine the planned capital allocation (if any) by branches and units and report on cases of allocation in contravention of regulations to provincial- or district-level People's Committees and concurrently to the State Treasury.

5.3. Investors shall send to finance agencies at various levels their investment capital allocation plans enclosed with the following documents:

- For planning projects: document approving the outline or tasks of the planning project and the cost estimates for planning work.

- For investment preparation projects: document approving the cost estimates for investment preparation work.

- For investment execution projects: document on the investment project on the construction of works (or the techno-economic report, for projects for which only the techno-economic report is required) and investment decision of a competent authority."

3. Point 2, Clause III, Section A, Part II, is amended as follows:

"2. Based on the above adjustment principles, ministries, branches and localities shall adjust plans and send adjusted plans to finance agencies at the same level and the State Treasury for use as a basis for capital allocation and payment."

4. Point 3(3.1), Clause II, Section B, Part II, is amended as follows:

"3.1. For projects funded with domestic capital:

- The investment project on the construction of works (or the techno-economic report, for projects for which only the techno-economic report is required) enclosed with the investment decision of a competent authority and decisions on readjustment to the project (if any);

- The written decision on the selection of the contractor according to the Bidding Law (including bidding, designation of contractors, direct procurement, competitive offers, self-implementation, and selection of contractors in special cases);

- The contract between the investor and the contractor (with attached documents specified by the Ministry of Construction);

- Cost estimates of each job, work item or work, and cost estimate approval decisions, for the case of contractor designation or self-implementation, and works performed not under contracts."

5. Points 1, 2 and 3, Clause III, Section B, Part II, are amended as follows:

"1. Objects eligible for capital advance and advance capital levels:

1.1. For contracts for the construction of works:

- For contracts valued at under VND 10 billion, the advance capital level is at least equal to 20% of the contract value.

- For contracts valued at between VND 10 billion and 50 billion, the advance capital level is at least equal to 15% of the contract value.

- For contracts valued at VND 50 billion or more, the advance capital level at least is equal to 10% of the contract value.

1.2. For contracts for procurement of equipment, the advance capital level is agreed upon by the investor and the contractor on the basis of the payment schedule specified in the contract but must not be lower than 10% of the contract value.

1.3. For EPC contracts:

- Capital for the procurement of equipment is advanced according to the equipment supply schedule specified in the contract.

- For other jobs, the advance capital level is at least equal to 15% of the contract value.

1.4. For consultancy contracts:

The advance capital level is agreed upon in the contract between the investor and the contractor and at least equal to 25% of the contract value.

1.5. For ground clearance work:

The advance capital level depends on the implementation schedule stated in the ground clearance plan.

1.6. For urgent projects such as dike building and reinforcement, flood control and drainage works, seedling projects, projects for immediately overcoming flood or natural disaster consequences: The advance capital level is at least equal to 50% of the contract value.

1.7. For some structures and semi-finished products used in construction which are of great value and need to be prefabricated in order to ensure construction progress schedule and some special supplies which need to be reserved on a seasonal basis, the advance capital level depends on practical needs and is agreed upon by the investor and the contractor.

1.8. The advance of capital for the above types of contract rests with investors and must be clearly stated in construction contracts. Advance capital may be disbursed after contracts become effective. If the investor and the contractor agree in the contract on a guarantee for advance capital, the contractor shall provide such guarantee. The advance capital level must not exceed the annual capital plan already approved for the bidding package. Particularly for an ODA project, if its annual capital allocation plan is lower than the foreign capital source, the advance capital level must not exceed the foreign capital source.

2. Recovery of advance capital:

2.1. Advance capital for jobs specified in Section 1 above shall be recovered upon payment for completed volumes of contracts, with the recovery starting from the first payment and completing when the payment for completed volumes reaches 80% of the contract value. The recovery level at a specific time shall be determined by the investor after reaching agreement with the contractor.

For ground clearance work:

- For ground clearance compensation and support work: After making payment to beneficiaries, the investor shall gather documents and carry out procedures for payment and recovery of advance capital within 30 working days from the date of payment.

- For the purchase of resettlement houses and other ground clearance works: Advance capital shall be recovered upon each payment for completed volumes and fully recovered when ground clearance work is completed.

2.2. The investor shall coordinate with the contractor in calculating a rational advance level, closely managing and using the advance capital for the proper purpose and proper subjects, and with high efficiency, and take responsibility for ensuring full recovery of the advance capital when the payment for completed volumes reaches 80% of the contract value.

If the amount of advance capital not recovered yet is left unused or used for other purposes, the investor shall fully recover and refund it to the state budget. It is prohibited to use advance capital for improper purposes or leave it unused.

2.3. If the plan year has expired but advance capital has not yet been fully recovered because the contract has not yet been paid up to the prescribed percentage, the amount not recovered yet shall be further recovered under the subsequent year's plan and not be deducted from the subsequent year's investment capital payment plan.

3. Documents on advance capital:

Apart from the specified basic documents, the investor, when advancing capital, shall send to the State Treasury the following documents:

- A written request for payment of investment capital;

- Money transfer vouchers.

- Guarantee for the advance amount to the contractor (if the investor and the contractor agree in the contract on an advance guarantee)."

6. Points 1, 2, 3, 4, 5, 6, 7 and 8, Clause IV, Section B, Part II, are amended as follows:

"1. For jobs performed under construction contracts, the payment for contracts must suit each type of contract, contract prices and conditions specified in contracts. The number of times of payment, payment period and conditions must be clearly stated in contracts.

1.1. For payment based on package prices:

Payment shall be made according to percentage (%) of the contract price or completed work or work item price corresponding to payment periods stated in the contract. After the contract is completed and the takeover test is made, the principal shall pay to the contractor the whole value of the signed contract and sums of money due to adjusted prices (if any).

1.2. For payment based on fixed unit prices:

Payment shall be made on the basis of completed work volumes (including newly arising volumes, if any, which are duly approved), which pass the takeover test in the payment period, and such works' unit prices stated in the contract or contract annexes. After the contract is completed or the takeover test is conducted, the principal shall pay to the contract the whole value of the signed contract and sums of money due to adjusted prices (if any).

1.3. For payment based on adjusted prices:

Payment shall be made on the basis of completed work volumes (including newly arising volumes, if any, which are duly approved), which pass the takeover test in the payment period, and unit prices adjusted according to the contract. Upon the payment deadline, if the conditions for adjustment of unit prices are still insufficient, payment can be made based on the unit prices temporarily calculated upon signing of the contract. The payment value shall be adjusted as soon as adjusted unit prices are available according to the contract. After the contract is completed or the takeover test is conducted, the principal shall pay to the contract the whole value of the signed contract and sums of money due to adjusted prices (if any).

1.4. For payment based on combined prices:

Payment shall be made according to the provisions of Items 1.1, 1.2 and 1.3 above.

1.5. For work volumes arising outside contracts:

- For any arising work volume which is equal to 20% or less of the relevant work volume stated in the contract and subject to a unit price stated in the contract, payment shall be made according to that unit price.

- For any arising work volume which is equal to more than 20% of the relevant work volume stated in the contract or any arising work volume for which no unit price is stated in the contract, payment shall be made according to a unit price approved by the investor under regulations.

- For any additional work volume which is beyond the scope of work stated in the contract and subject to the payment mode based on package price, the additional value shall be included in a cost estimate and the principal and the contractor shall sign a contract on addition of that arising value.

1.6. Payment dossiers:

When a completed work volume is tested before takeover according to the payment period and conditions stated in the contract, the investor shall make and send a dossier of payment request to the State Treasury, which comprises:

- A table of values of completed work volumes under the contract (made according to a form set in Appendix 2 to the Ministry of Construction's Circular No. 06/2007/TT-BXD of July 25, 2007, guiding contracts in construction, or any document supplementing or replacing it);

- A written request for investment capital payment;

- Money transfer vouchers.

When a work volume arises outside the contract, the investor shall send the Table of values of work volumes arising outside the contract (made according to a form in Appendix 4 to the Ministry of Construction's Circular No. 06/2007/TT-BXD of July 25, 2007, guiding contracts in construction, or any document supplementing or replacing it);

2. For jobs performed not under construction contracts (for self-construction of works, project management jobs directly performed by investors), payment shall be made to suit each type of job, and based on the report on completed work volume and approved cost estimate for each job.

3. The principle for payment control by the State Treasury:

Based on the investor's dossier of payment request, the payment clauses of the contract (number of times of payment, payment period, time and conditions) and the value of each time of payment, the State Treasury shall make payment for the investor. The investor is responsible for the accuracy and legality of completed volumes, unit prices and cost estimates of various jobs and quality of works. The State Treasury bears no responsibility for these matters. The State Treasury shall only base itself on the payment dossier and make payment according to the contract.

4. The time limit and mode of payment:

4.1. Within 7 working days after receiving the investor's complete payment dossier as specified, based on the contract (or the approved cost estimate, for jobs performed not under contracts) and the payable amount requested by the investor, the State Treasury shall control and allocate capital to the project and concurrently pay, as requested by the investor, directly to contractors and recover the advance capital under regulations on the investor's behalf.

The State Treasury shall control payment on the principle that payment is made first and approval is given later for each time of payment or control comes first and payment is made later for the last time of payment for the bidding package and the contract. Based on this principle, the State Treasury shall guide in detail the mode of payment control, ensuring favorable conditions for investors and contractors and strict compliance with the State's regulations.

4.2. The annual capital amount planned to be allocated to a project shall only be paid for completed volumes which have been tested for takeover by the end of December 31. The deadline for payment (including advance and payment for completed volumes) is the end of January 31 of the following year (except for projects with the implementation and payment durations allowed by a competent authority to be prolonged).

5. For investment projects funded with official development assistance (ODA), if treaties which have been signed by competent agencies or organizations of the Socialist Republic of Vietnam contain capital payment and settlement management provisions different from those of this Circular, the provisions of those treaties prevail.

6. Investors shall arrange sufficient funds under annual plans to purchase insurance for construction works according to regulations. The State shall not pay to investors amounts used to offset losses and risks falling within the scope of insurance if investors do not purchase insurance for construction works under current regulations.

7. The amount to be paid for each job, work item or work must not exceed the approved cost estimate or bidding package price. The total amount to be paid for a project must not exceed its approved total investment capital.

The amount to be paid for a project in a year (including advance and payment for completed volumes) must not exceed the capital level planned to be allocated to the project for the whole year. Particularly for ODA projects, if the capital planned to be allocated is lower than the foreign capital amount, the capital level for payment must accord to the foreign capital amount."

7. Point 2, Clause II, Section C, Part II, is amended as follows:

"2. Advance and payment of capital:

2.1. Advance of capital:

a/ A dossier for advance of capital comprises:

+ The decision on the construction of an urgent work, issued by a competent person;

+ The written request for payment of investment capital;

+ The money transfer voucher.

+ The contractor's guarantee for the advance (if the investor and the contractor agree on advance guarantee in the contract).

b/ Advance level and recovery of advance capital:

+ The level of advance capital is at least equal to 50% of the contract value or the approved cost estimate for the work or work item.

+ The advance capital shall be gradually recovered upon each payment for completed volumes and fully recovered when 80% of the contract value or the cost estimate value is paid.

c/ The management of advance capital complies with the provisions of Section 5 above.

2.2. Capital payment:

The control and payment of capital comply with the provisions of Section 6 above."

8. Point 2, Clause III, Section C, Part II, is amended as follows:

"2. Advance and payment of capital:

The management, advance and payment of capital for makeshift works shall be performed under the provisions of Sections 5 and 6 above and the following additional provisions:

- For cases of package payment specified in the Construction Ministry's Circular No. 04/2005/TT-BXD of April 1, 2005, capital for makeshift works may be accounted as payment for the completed work volume of the project. Apart from the project's documents, the payment dossier also comprises a written request for payment of investment capital and the money transfer voucher.

- For large and complicated works with cost estimates for the building of makeshift houses at construction sites for accommodation and construction administration, payment shall be controlled based on the approved cost estimates. Apart from the project's documents, the payment dossier also comprises the decision approving the cost estimate, the approved cost estimate, a table of values of completed work volumes, a written request for payment of investment capital, and the money transfer voucher."

9. Point 3 (3.2 and 3.3), Section D, Part II, is amended as follows:

"3.2. Advance payment of capital:

- For projects capitalized at VND 1 billion or more, the level of advance capital and recovery of advance capital comply with regulations applicable to investment projects funded with the investment development capital source.

- For projects capitalized at under VND 1 billion, the advance capital is at least equal to 30% of the contract value or the approved cost estimate. Advance capital shall be gradually recovered upon each payment for completed work volumes and fully recovered when 80% of the contract value or the cost estimate value is paid.

- A dossier of advance payment of capital comprises: a written request for advance payment of investment capital, the money transfer voucher, the contractor's guarantee for the advance (if the investor and the contractor agree on advance guarantee in the contract).

- The management of advance capital complies with the provisions of Section 5 above.

3.3. Capital payment:

- Non-business capital of investment nature shall be transferred from the state budget to the State Treasury for payment according to regulations on management and allocation of non-business capital.

- The control and payment of capital comply with the regulations applicable to investment projects funded with the state budget."

10. Clause I, Section E, Part II, is amended as follows:

"I. Reporting:

1. For investors, ministries and provinces: Reports shall be made under the provisions of the Prime Minister's Decision No. 52/2007/QD-TTg of April 16, 2007, on regulations on reports on implementation of state investment capital, the Ministry of Planning and Investment's Circular No. 05/2007/TT-BKH of August 9, 2007, promulgating report forms and guiding the implementation of the Prime Minister's Decisions No. 52/2007/QD-TTg of April 16, 2007 and the Ministry of Planning and Investment's Decision No. 803/2007/QD-BKH of July 30, 2007, promulgating regulations on reporting on implementation of ODA programs and projects.

2. For the State Treasury:

- To comply with the information and reporting regulations of the Finance Ministry.

- At the end of a plan year, state treasuries shall settle the used investment capital with finance agencies of the same level in accordance with regulations on state budget settlement.

- At the end of a plan year, state treasuries shall certify the amounts paid in the year and the total amounts paid from the construction commencement to the end of the state budget year to each of projects formulated by investors."

11. Clauses I and IV, Section F, Part II, are amended as follows:

"I. Investors:

- To perform their assigned functions and tasks according to regulations. To receive and use capital for proper purposes and proper objects in an economical and efficient manner. To strictly abide by the provisions of law on the financial management of development investment.

- To conduct takeover tests of work volumes, make payment dossiers and file payment written requests for contractors within time limits stated in contracts.

- To be answerable for the accuracy and lawfulness of completed work volumes, norms, unit prices and cost estimates of various kinds of jobs, quality of works and the value requested to be paid; to assure the accuracy, truthfulness and lawfulness of data and documents in dossiers supplied to the State Treasury and concerned state agencies.

- To send reports in time and fully as prescribed to investment-deciding agencies and concerned state agencies; to supply full dossiers, documents and facts according to regulations to the State Treasury and finance agencies in service of capital management and payment; to submit to the inspection by finance agencies and investment-deciding agencies regarding the use of investment capital and observance of the State's development investment financial policies and regimes.

- To practice accounting as required; to settle investment capital according to current regulations.

- To request capital payment when all conditions are satisfied and request the State Treasury to reply and explain on matters they find unsatisfactory in capital payment.

IV. The State Treasury:

- To promulgate a process of investment capital payment for application nationwide.

- To guide investors to open accounts for advance and payment of capital.

- To control and pay capital in time and fully for eligible projects.

- To clearly explain in writing to investors any reduced or rejected payment amounts, to reply to investors' inquiries about capital payment.

- To control payment only on the basis of documents supplied by investors and on the set payment principles, take no responsibility for the accuracy of work volumes, norms, unit prices and quality. When detecting that decisions of competent authorities are contrary to current regulations, to make written proposals for re-consideration and recommendations. Past the prescribed time limit, if no reply is given, to settle the case according to their recommendations. If the given reply is unsatisfactory, to settle the case according to competent authorities' opinions and, at the same time, to report such to the competent authorities of higher level and finance agencies for consideration and handling.

- To urge investors to pay all debts after the projects have been settled and their accounts liquidated.

- To comply with information and reporting regulations and settle investment capital and non-business capital of investment nature belonging to the state budget capital source according to the State Budget Law and the Ministry of Finance's guidance.

- To request investors to supply dossiers, documents and information according to regulations in service of capital payment control.

- To conduct regular and irregular inspections of investors' execution of projects, observance of development investment financial regulations and policies; and management and use of investment capital. To suspend capital payment or recover capital amounts which are used by investors for improper purposes, improper beneficiaries or in contravention of the State's financial management regulations and, at the same time, report such to the Ministry of Finance for handling.

- Not to join in takeover test councils of works and projects.

- To organize capital control and payment according to uniform professional processes, to simplify administrative procedures while ensuring strict capital management and timely, adequate and convenient payment to investors.

- At the end of a plan year, to certify amounts paid in the year and total amounts paid from the construction commencement to the end of the state budget year for each project, give comments on the observance of management regulations, unit price norms and other policies and regulations as prescribed.

- To be answerable to the Minister of Finance and law for the receipt and use of state budget capital and payment in construction investment.

12. Implementation effect: This Circular takes effect 15 days after its publication in "CONG BAO."